Abbey's top man steps down.

Byline: Grame Evans

BANKING group Abbey National began the search for a new chief executive yesterday after under-pressure boss Ian Harley stepped aside.

Mr Harley's 25-year service with the mortgage giant came to an end as he paid the price for a shock profits warning issued last month.

The 52-year-old Scotsman had been chief executive since March 1998 and now stands to receive an estimated pounds 1m in compensation.

Chairman Lord Burns will take on executive duties while the search for a successor takes place.

Early contenders are tipped to include Royal Bank of Scotland's head of retail banking Gordon Pell and Northern Rock chief executive Adam Applegarth.

Analysts added that Mr Harley's departure - which Abbey said was agreed by mutual consent - further raised hopes of a takeover bid for Britain's second biggest mortgage lender.

Mr Harley, who earned pounds 833,000 last year, disappointed some investors by fighting off interest from Lloyds TSB and was seen as a possible barrier to a recently mooted tie-up with National Australia Bank.

Abbey shares surged by more than 2pc in a depressed market yesterday as investors viewed the change as a positive development for the group.

Mark Durling, banking analyst at Brewin Dolphin Securities, said: ``This will give some confidence back to institutional investors. Any change at the moment has got to be good.''

Abbey shocked the market by issuing a profits warning last month because of the cost of writing off debts at its corporate-based wholesale banking arm.

In light of the warning, Abbey said pre-tax profits this year would be down on the pounds 1.9bn expected by the market.